A reduction in interest rates is usually good news for entrepreneurs.

However, the Bank of England’s decision to take another half point off its base rates to leave them at a nominal one per cent is at best pointless and at worst counter-productive.

Everyone agrees that the currsent crisis is a crisis of confidence – but cutting rates so drastically is a symptom of lack of confidence.

It looks like a panic decision.

It is the mirror image of John Major’s excessive increases in interest rates on “Black Wednesday”, 1992, which, far from calming the markets, convinced them that Britain’s position in the ERM was unsustainable.

A one per cent interest rate is equally unsustainable. If banks are to get out of intensive care, they need to become less dependent on injections of public money and return to reliance on savers depositing with them.

That is not going to happen with interest rates at such meaningless levels. 

Of course, this would be no bad thing if it encouraged those with surplus cash to invest it directly in business rather than putting it in banks. In theory, low interest rates from the banks should increase equity investment in business, but in practice there is little confidence in business – partly because on the credit squeeze imposed by the banks.

Since the credit squeeze is due to lack of supply – not lack of demand – higher interest rates would actually encourage deposits and therefore, for once, increase lending.